Australian shares set to open higher. Wall Street advances. Bitcoin holds above $US17,000. $A hovers near US69¢.
US inflation data set for release early Friday AEDT are likely to come in cooler than expected, helping stocks extend a bear-market rally, according to JPMorgan ChaseWhile consensus expects December’s consumer price index to slide to a 6.5 per cent annualised pace, the bank’s team including Andrew Tyler sees an almost two-in-three chance for the data to arrive within 10 basis points of the estimate, with a bias to the soft side.
Since investors are largely defensively positioned, they argue, any evidence that the Federal Reserve’s inflation-fighting campaign is working will spark a rush to unwind bearish positions. In that case, they see the S“This should aid the nascent bear rally, but we remain cautious as long as the Fed remains active with its tightening cycle,” Tyler wrote in a note to clients.
Should inflation fall below 6.4 per cent — a scenario that the team assigns a 20 per cent probability — the equity benchmark would jump 3 per cent to 3.5 per cent. For the bond market, moves are expected to be muted unless the data show a material miss, dropping to 6 per cent or lower. A repricing of expectations for a pause in the tightening cycle at the Fed’s March meeting seems likely only if CPI prints below 4.5 per cent to 5 per cent, their analysis shows.
On the flip side, a CPI reading above 6.6 per cent is expected to hit risky assets with bond yields rising along the curve. And a reading above 6.8 per cent threatens to shock investors with what the team calls “a tail event”.
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